French industrial production fell back modestly in July, retreating from its strong growth in the prior month, as uncertainty reigns over the country’s economic direction after the ousting of its government this week.

Industrial output was 1.1% lower on month in July, offsetting some of the 3.7% rise in June, France’s statistics agency Insee said Tuesday. That was a tad weaker than the 1.0% decline in production expected by a consensus of economists polled by The Wall Street Journal.

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Much of the strong rise in June—the largest bump in industrial production since 2020—came from production of Airbus planes. Manufacture of a range of transport equipment that excludes autos but includes aircraft fell 16% on month in July after a 26% jump in June. Production also fell back in electrical equipment and pharmaceuticals, sectors particularly exposed to the uncertainty surrounding U.S. tariffs.

But the relatively modest decline overall in July reflects some resilience in industry that was also captured by German production data, which came in better than expected on Monday.

Despite the July decline, manufacturing is still set to boost economic growth in France in the third quarter, according to Pantheon Macroeconomics economist Claus Vistesen.

Investment looks set to be better than expected, although a broader set of leading indicators suggests downside risks, he said in a note to clients.

However, the fall of France’s government led by Prime Minister Francois Bayrou on Monday once again raises uncertainty about business conditions in the eurozone’s second-largest economy.

A drop in business and consumer confidence is likely, leading to postponed investment, hiring, and consumption decisions that will slow economic momentum, ING economists Charlotte de Montpellier and Michiel Tukker said in a note.

“Rising market rates are weighing on financing costs and may slow down certain sectors, particularly real estate and construction,” he added.

There remains tentative hope that the beleaguered industrial sector could still rebound in the eurozone this year as the European Union’s trade deal with the U.S. alleviates some trade uncertainty, Germany’s increased spending on defense and infrastructure boosts demand and the European Central Bank’s previous interest-rate cuts feeds into businesses.

Write to Ed Frankl at edward.frankl@wsj.com

Corrections & Amplifications
A drop in French business and consumer confidence is likely, leading to postponed investment, hiring, and consumption decisions that will slow economic momentum, ING economists Charlotte de Montpellier and Michiel Tukker said in a note. An earlier version of this article incorrectly cited another economist. Corrected on September 9.

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